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Macedonia annuls airline subsidy tender

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The Macedonian Ministry for Transport and Communications has, for a second time this year, annulled a tender for the granting of financial support to an airline in order for it to launch new routes between 2019 and 2021. Wizz Air, which has benefited from similar financial incentives between 2012 and 2018, was the only carrier to apply. However, the Macedonian Minister for Transport and Communications, Goran Sugareski, said the budget airline did not comply with the terms and conditions outlined in the tender brief. According to the rules, the selected carrier had to establish and/or maintain a base with at least one aircraft in Skopje or Ohrid by January 10, 2019 at the latest for the duration of the financial support program. Furthermore, the carrier in question had to launch at least two new routes from Skopje by January 10 and four new routes from Ohrid, the first two in January 2019 and the rest within a year of being granted state support.

However, Mr Sugareski noted, "The tender rules clearly state that an airline is obligated to introduce two routes from Ohrid by January 10, 2019 and two more within a year of signing the contract. Wizz Air offered to introduce all four destinations in August 2019. As a result, the tender commission concluded that the conditions of the public call were not met and recommended that this public call be annulled". The government will launch a new tender under the same rules as soon as possible. A similar public call held earlier this year was annulled after the single bidder allegedly failed to clearly write its address on the submitted envelop. Mr Sugareski denied media reports that the tender was being fixed for Albania's newly launched national carrier Air Albania, which is yet to introduce scheduled flights after taking delivery of a single Airbus A319 aircraft from its part-owner Turkish Airlines. Air Albania does not meet the tender requirements.

During the first three quarters of the year, Wizz Air handled 1.098.511 passengers on flights to and from Macedonia, resulting in a passenger share of 60.3%. Among low cost carriers operating to the country, Wizz Air holds a 92% share. The Macedonian market has emerged as having the largest share of passengers handled by low cost carriers in Europe. Some 65.6% of those travelling to and from the country are carried by no frills airlines. Despite having the largest share of passengers handled by low cost carriers, neither of the three busiest LCCs in Europe - Ryanair, easyJet and Norwegian Air Shuttle - maintain services to the country.

What the Ministry seems to fail to understand is the basics of airline business.

You can't expect somebody to be at your call with a 3 months notice for such an investment, especially when there's only a handful - and in this case only one - interested parties.

It is the most basic business planning - due to a number of reasons, both operational and commercial, planes are already allocated 9 months in advance. No airline is going to wait around for Macedonia's new government to learn how the business works, especially if they're not willing to listen.

First off, no other LCC will embark more aggressively, because this is Wizz's territory. Government should have thought this one through and should have diversified the airline structure much earlier. Off course, should they have done that, this client would not have been growing at a rate of 20% for 5 years i a row. Nemozes biti jeben i pošten. Simple as that.

Secondly, no tender ultimatum will do a difference. One Wizz will unlikey bow down to the tender rules of single small market. It has plenty of markets where they can exercise their policy.Now, if SKP is a money making machine, that would have been different.

From what I heard among people in TAV, they are not happy with SKP in regards to the finances.

+1'000. Something I said in 2012 and is still valid, even though nowadays the law of diminishing returns kicks in. Back then it was way too obvious.

However, put yourself in their shoes. Why would they launch anything if they know nobody else is interested, there are no obvious picks and the money's lined up in any case? The only time they did it when Ryanair was sniffing around and they launched CPH, BTS and SXF.

That means, in order to work with a traffic stimulating LCC you have to lower your charges to such a level that you won't be able to make any money. Most probably the airport was making more money with 700k passengers before Wizz.

Worst part is (which is likely to start soon according to these news), once such LCCs occupy a significant share of the airport's traffic, they start to blackmail the airport, tourist board etc. either to maintain the initial financial support received, or to increase it. Then it becomes the story of a frog in boiling water. In order not to lose half of the existing passenger traffic, airports tend to bow to pressure, until there's no money left to feed the hungry beast. But SKP is operated by a big holding, it'll be interesting to see the clash.

Sorry, but now you're just speculating :( I'm not saying the reasoning is bad in theory, but it mostly applies to Ryanair way of doing business, and not to this particular one.

In reality other airlines are still paying the original list charges and Wizz is still paying a pretty high level because TAV won't give any significant volume discounts because they claim Wizz don't need any due to the gov't stepping in. Hence they pocket most of the cash from the subsidies. And they (TAV) have otherwise no leverage beyond local political arm twisting. They're actually just a bunch of greedy Turks who, as we say, have found a village with no dogs in it..

@anon 9:20Quoying one manager from TAV that I briefly spoke to..."while the traffic volumes are increasing at SKP, financial KPIs are not good." It was not an appropriate time nor place to discuss more...

It's just that evaluating financials can depend on the benchmark. It can be the original ROI, it can be year over year growth expectations, or similarly it can be the 2018 budget. I know for certain that by the first criteria SKP is an overwhelming success. But it might not be for the 'here and now' criteria, which is where the greediness kicks in.

If I were MK Gov I'd be careful fooling around with an operator that has more than 60% market share in the country. Be warned, W6 will not have made 100s of millions of Euro investments that 'Tranquilis' informs us about and then be pushed around. They will use every means at their disposal, judicial and commercial, to protect their market and more importantly their investments.

I found it preposterous that the previous tender was cancelled. In my opinion, it could have been a strategy of the MK Gov to open W6 offer and then reach out to FR/U2 and say "here's the offer you need to beat. Can you improve on that?" It appears that the answer was no, but they still won't take 'No' for an answer.

It's not clear what can the MK Gov achieve by cancelling the second tender when launching the third one will anyhow push the new route opening dates towards the end of the summer season schedule anyhow. What is clear, however, is that W6 and MK Gov do not seem to be talking or at least agreeing on much.

The news of any disturbance in the force have been greatly exaggerated ;)

I can only agree on the last point, which is that the MK Gov and W6 do not seem to be agreeing much. But then again, Mr. Sugareski has made a statement that he doesn't intend to develop relatioships with companies applying to their tender(s). A man of principle or something else, you be the judge.

It is now clear that SKP will be stagnated during 2019. The chances of seeing any new (hopefully legacy) airline is highly unlikely.Oh well, the N Macedonian taxpayer cannot continue paying all the time.Nice try though.

It does not benefit Ryan or easy jet. I don't think that any of those airlines would be prepared to schedule flights, put tickets on sales and open a base in less than 3 months as is required from a market they have never flown from.

I just don't get where the rift with Wizz occurred? I mean first you reject them because of an envelop, second time you reject them because they plan to start four routes from a holiday leisure destination in August instead of the middle of the dead season in January.

Probably mid next month. So far all of the tenders were around that time. That is the absolute last minute they can issue tender. So let's say 13 November - 13 December. If they issue it any later we have holidays, Christmas, New Year.... But it's still ludicrous that any airline wins a contract on 13 December and has to open a base on 10 January. Crazy.

Thanks for Wizz, a large portion of young Macedonians were able to afford to see the world for the very first time. What Macedonian Gov is doing is wrong. Wizz can easily turn to PRN, as it has already started doing so apparently.

Maybe the idea is for the government to run tenders to show how they want to give subsidies to airlines but in actual fact they won't. After the third time no one applies (because Wizz will probably give up) then they will say there is no interest for this kind of incentives and money will be used for something else.

This was expected. You just can't put your whole eggs in one basket. If Wizz doesn't get what they want Macedonians might soon begin to fly out of PRN or INI as well. Which isnt't that tragic after all.

Fish stinks from the head, does it not? i think here is the ticket mafia influencing the tender. they want to have the marked under their hands. they are buying massiv tickets from wizzair in sesonal period (like summer) You can see now that the prices on the website are massive rising up. And if somebody is abel to have a lokk to the bookingsystem from wizz, they would see that 2-3 person are buynig 75% capacitiy from a airplan....

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